Since Caltex Australia Limited (ASX:CTX) released its earnings in June 2018, analyst forecasts appear to be pessimistic, as a -17% fall in profits is expected in the upcoming year compared with the past 5-year average growth rate of 20%. Currently with a railing-twelve-month profit of AU$619m, the consensus growth rate suggests that earnings will drop to AU$511m by 2019. I will provide a brief commentary around the figures and analyst expectations in the near term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
View our latest analysis for Caltex Australia
What can we expect from Caltex Australia in the longer term?
The longer term expectations from the 11 analysts of CTX is tilted towards the positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To get an idea of the overall earnings growth trend for CTX, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.
By 2021, CTX’s earnings should reach AU$529m, from current levels of AU$619m, resulting in an annual growth rate of 0.4%. EPS reaches A$2.44 in the final year of forecast compared to the current A$2.37 EPS today. The main reason for growth is a result of a higher revenue growth of 1.5% outpacing cost increases. Analysts are predicting this high revenue growth to squeeze profit margins over time, from 2.9% to 2.5% by the end of 2021.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For Caltex Australia, I’ve compiled three key factors you should look at:
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Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
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Valuation: What is Caltex Australia worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Caltex Australia is currently mispriced by the market.
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Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Caltex Australia? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.